Reforms in Tax - A taxpayer’s wish list

[Excerpts of my speech at Conference on India 2.0 as a part of 37th SKOCH Summit at India Habitat Center, New Delhi September 2014] 

 “The only two things certain in life are taxes and death”. Why was taxes compared with morbidity and death and taxmen considered a villain? Because tax was considered legal extortion. The expected role of taxman was to make life difficult for those who don’t comply. The tax laws were complex and complicated that even genuine taxpayers ended up making mistakes. Instead of being an enabler catching these mistakes was the prime focus of the department. Complexity of the tax law was a aid in this enforcement by terror and a tool for the corrupt.

The modern tax department is attempting a shift in its focus. The shift is towards being an enabler, making it easy and convenient for the genuine taxpayer to comply.

This is one of the tectonic shifts that are happening in the environment for the tax administration. There are more. The quantum leap in the volume of trade and commerce in the economy is resulting in exponential growth in taxpayers and taxable transactions. The globalisation leading increased international trade and e-commerce are adding to complexities to tax administration. In India the impending transition to a nationwide transition to Goods & Service Tax (GST) is another big shift expected in the near future. (Though this near future shift has been eluding us for years, we hope it will fructify this time)

In this increasing complexity and exploding volume the challenges are manifold for the tax administration especially with shift in their focus and the attendant reforms it is attempting.

Let us take a look at some of the expectations the taxpayer have with respect to these reforms.

Simple, Up-to-date, consistent information online

To begin with the taxpayer expects simplification of laws which are easy to understand and comply with limited exception and a nationwide standardisation. We also expect comprehensive information available online. Today many of the tax administrations in our country have web portals and have made extensive information available online. But they often come with a caveat along the following lines. “The department does not claim this to be up-to-date or comprehensive. The taxpayer is expected to keep himself abreast of all latest notifications and amendments and the department is not responsible for any fashion for any error and omission in the information available in this site”

We need to go forward in our information dissemination. We need you to guarantee that “what is not published on our portal does not exist” I am not suggesting a utopian model. Many regulators and law enforcement bodies in the world have already reached this level of sophistication.

Will it be possible to publish your interpretation of confusing provisions very clearly? In this manner it would also be consistent in its dealing with the taxpayers across the country.  It could help in reducing the rent seeking behaviour of many assessing officers who attempt to interpret for their convenience.

Don’t ask for same information again and again

Various tax departments in the country ask the taxpayers same financial information multiple times. Can you establish a mechanism to collect financial information from the taxpayers once and share the same among them as needed? Only in case in which it needs additional information for specific investigative purpose it should contact the taxpayer again to provide the same.

Can we think about standardisation of data format?

Different tax authorities today specify different data formats and technology specific forms to submit the data. Could you consider establishing a technology agnostic data format like XBRL for collection of data? This would also require a standard taxonomy being developed for all financial reporting for various tax departments if not for all other regulators who require the same financial information.

Avoid calling me in person and when you call please don’t make me wait

Can you consider establishing processes that could avoid physical visits for routine matters? Tax payers should be able to interact with the officers over phone or mail for routine matters. Even when they are required to visit for some clarification they should be given advance intimation of the documents and information they have to bring and should give them appointment to and adhere to the agreed time and avoid making them wait.  

Can I pay tax from my account in my bank?

In this day and age of electronic connectivity can you allow me to pay all my taxes from my account of choice instead of asking me to open accounts in different banks by different tax authorities

What I am hoping are not impossible to be met. But it needs a change in mind-set. We can hope that we will reach there one day

To make a crooked stick straight, we need to bend it the contrary way. - Michel Montaigne